Lower indirect costs include avoided costs attributable to the selection of a PPP. The overhead costs of MnDOT and Metro Transit associated with the Hiawatha Corridor project were trimmed by an estimated $25 to $38 million due to the project's completion one year earlier than likely would have been the case with a design-bid-build project delivery approach.
Another form of indirect cost savings comes in the form of avoided inflation costs on building materials. For example, the Denver T- REX project design-build consortium aggressively purchased building materials early in the design process, as soon as design plans were complete enough to justify a purchase. This locked in prices early and protected the project against any increases in building materials costs. And by overlapping design and construction, the project timeframe was condensed, thereby eliminating exposure to the rapid rise in the price of construction commodities in 2005 and 2006. Conservatively, delivery of the Portland MAX Airport Extension project via design-bid-build would have added three years to the project schedule, adding $10 to $15 million (or 8 to 12 percent) to the cost of the project due to escalating materials costs.
Design-build project delivery simplified WMATA's Largo Metrorail Extension project management by reducing the number of contractors reporting to WMATA to three from an estimated 15 to 20 contractors that the agency might have hired had it applied a design-bid-build approach. This would have increased the cost and complexity of managing the project and procuring contractors. WMATA originally justified a design-build delivery approach for the Largo Metrorail Extension based on projections of overhead cost savings related to a shortened project timeframe versus commodities-related cost savings, which did not substantially impact the project given its completion before the recent sharp increases in key construction commodities including oil, concrete, and steel.
Indirect cost savings also result from the transfer of risk of operating and maintenance cost increases to a consortium. NJ Transit will pay the Hudson-Bergen Light Rail project's DBOM consortium a guaranteed price in 1996 dollars for operation and maintenance of the line, subject to increases in the consumer price index (CPI) and other inflation indices for selected operating costs, including electricity. This insulates the agency from growth in operating costs for reasons other than inflation, and provides the operating consortium incentive to keep a lid on O&M cost escalation.